Organized files is only half the battle when it comes to preparing your taxes every year. Here are some tips you can put into action throughout the year to make next year’s tax data collection simple.
If you have a bookkeeper or a financial team then bookkeeping is their top priority, but it’s still recommended that you meet with the team regularly to ensure they have everything they need, and taken care of. If you’re a small business owner or contractor, tasks aside from paying bills and sending invoices may get put off, “until we have a lull.” You don’t want a lull, so it’s best to plan your bookkeeping strategy to perform smoothly around busy times.
At least monthly, but weekly is better. Maybe the last thing you do every Friday is tally up your kilometres and sip one more coffee before you head out into rush hour. This will make the task much easier, particularly if your meetings are spread out across Ontario. Trust us, your administrator doesn’t have time to go back through your calendar tallying up the distance traveled to a year’s worth of meetings, and neither do you.
Rather than tossing your receipts into a box, or filing them alphabetically, file according to the Chart of Accounts. Business expenses have differing percentages assigned when it comes to taxes. For example you may be able to deduct 50% of your meals but 100% parking fees from your gross income. This is a highly generalized example, and there are conditions put on every aspect of the Chart of Accounts so these expenses have to be entered separately anyway. Your bookkeeping software will have an itemized list ready for you, but as a sneak peek you can expect to see meals, fuel, vehicle maintenance, software/apps purchases, and computer maintenance, just to name a few.
If you work from home, you can deduct a percentage of your living costs so keep track of your water, heat, hydro, and rent. The costs have to apply to the workspace specifically, so if you fixed the ceiling in the kitchen but your workspace is in the guest bedroom you can’t claim any part of the maintenance cost.
Not only will it make finding your Notice of Assessment a lot easier – you need some of the information from that, particularly if you work as freelance or sole proprietorship – but it’s a thorough reminder of the documentation you need to provide again.
While you only have to focus on your tax file once a year, Racolta Jensen LLP focus on it every day and can provide you with a complete list of deductions and credits, as well as help you avoid penalties. We’re also up-to-date on changes to the federal and provincial tax programs. View our offered services then visit our office at 47 Dickson St., in Cambridge, Ontario or call (519) 622-1485 to book an appointment.